Bank of Hatfield v. Chatham, 205

• Court: Supreme Court of Arkansas
• Writing for the Court: HART, J.
• Citation: 255 S.W. 31,160 Ark. 530
• Parties: BANK OF HATFIELD v. CHATHAM
• Docket Number: 205
• Decision Date: 29 October 1923

255 S.W. 31

160 Ark. 530

BANK OF HATFIELD
v.
CHATHAM

No. 205

Supreme Court of Arkansas

October 29, 1923

[255 S.W. 32]

Appeal from Polk Circuit Court; James S. Steel, Judge; affirmed.

STATEMENT OF FACTS.

R. B. Chatham brought this suit against the Bank of Hatfield to recover the sum of $ 1,580 which he had deposited with the bank and which the bank refused to pay him on demand therefor.

The bank defended on the ground that the money had been withdrawn from it by the authority of the plaintiff.

The plaintiff in 1920 opened an account with the defendant, and, between that time and the occurrences leading up to this litigation, his total deposits amounted to $ 2,400. At the time he opened his account, the bank agreed to pay him 4 per cent. on daily balances, and, in the early part of 1921, the plaintiff had on deposit in the bank something more than $ 2,000.

L. H. Johnson had been cashier of the bank, but his duties had been changed to that of vice-president early in 1921, and he continued in that position during the period of transactions involved in this suit. Johnson worked on the outside, and his main duties were to collect special accounts due the bank. At stated periods the bank furnished Chatham a statement of his account, and the statement rendered on the first day of July, 1921, shows that he had a balance in the bank of $ 1,906.52. On the 18th day of February, 1921, L. H. Johnson, as vice president of the bank, drew a check for $ 1,000, signed Chatham's name to it, and charged the amount thereof to the account of Chatham. At the same time Johnson executed a note payable to Chatham's order for this amount, and signed the names of his brothers thereto as sureties, and placed the note among the private papers of Chatham in the bank. He then withdrew from the bank $ 1,000 of Chatham's deposit. On the 7th day of April following, he withdrew $ 300 from the bank in a similar manner. On the 27th day of June, 1921, in the same manner he withdrew $ 200 from the bank, making the total taken by him from the bank and charged to Chatham's account, $ 1,500.

Chatham was a witness for himself. According to his testimony, none of the withdrawals made by Johnson were shown in the statements received by him from the bank. There was nothing in the statements to indicate that his money had been withdrawn from the bank by Johnson, and he did not know anything about the matter until it had been done. On the 25th day of August, 1921, Chatham received a letter from Johnson in which he admitted that he had used $ 1,500 of Chatham's money in the bank. This was the first information that Chatham had that his money had been withdrawn from the bank by Johnson. He made an investigation of the matter, and made a demand of his deposit by drawing a check upon the bank for the balance thereof. The bank refused payment on the check, and on December 12, 1921, Chatham sued it to enforce payment. Johnson withdrew the $ 1,500 by signing Chatham's name to the checks on the bank. This was done without the knowledge or consent of Chatham.

L. H. Johnson was a witness for the defendant. He admitted that he was vice president of the Bank of Hatfield during the period of these transactions in the year 1921. He admitted that he made the statement of April 30, 1921, and sent it to the plaintiff, but stated that he was working for the bank on the outside during that year, and occasionally got out statements of customers of the bank. He admitted making the statement of July 1, 1921, and said that sometimes he would drop in the bank and help with the bookkeeping and work of that kind. He made other statements to Chatham of his account, and, in fact, made all the statements that Chatham received. The cashier permitted him to make these statements, and Johnson claimed that he had authority from Chatham to withdraw his money from the bank. This authority was given him verbally by Chatham in the early part of 1921, in order that Chatham might receive 10 per cent. interest on his deposits. Johnson withdrew the money of Chatham by signing the name of Chatham to the checks above referred to.

The jury returned a verdict for the plaintiff, and from the judgment rendered the defendant has appealed to this court.

Judgment affirmed.

Norwood & Alley, for appellant.

OPINION [255 S.W. 33]

[160 Ark. 534] HART, J., (after stating the facts).

The first assignment of error is that the court erred in giving instruction No. 1, which is as follows: "The court instructs the jury that when Chatham deposited his money in the bank, it became the property of the bank, and it could be paid out and charged to Chatham's account only upon authority from Chatham."

It has been repeatedly held by this court that no principle of law is better established than that a general deposit of money in a bank passes the title immediately to the bank and establishes the relation of debtor and creditor between the bank and the depositor. The bank is bound by an implied contract to honor the checks of the depositor to the extent of his deposits, and becomes liable upon its refusal to do so. Carroll County Bank v. Rhodes, 69 Ark. 43, 63 S.W. 68; Darragh Company v. Goodman, 124 Ark. 531, [160 Ark. 535] 532, and cases cited; and Robinson v. Security Bank & Trust Co., 141 Ark. 414, 216 S.W. 717.

It is insisted, however, by counsel for the defendant that the instruction is misleading in the form in which it was given, and that it carries the inference that, in order to relieve the bank of liability, Chatham must have in person given his check or in person authorized the bank to make the transfer. Hence it is claimed that the instruction as framed denies the jury the right to find in favor of the bank if it should believe that Chatham told Johnson to use his money, and, acting on this authority, Johnson did use it by withdrawing the money on Chatham's check.

We do not think that the language of the instruction is fairly susceptible of this construction. It is a plain statement to the jury of the principles of law as uniformly held by this court.

The next assignment of error is that the court erred in giving instruction No. 2, which is as follows: "The name of Chatham forged to a check would not authorize the bank in paying the money on such check. So, in this case, if you believe from the evidence that Johnson forged Chatham's name to the checks, and the money was paid out on them, the bank would still be liable to Chatham for the money."

We think that the principles of law applied in this instruction are settled against the contention of counsel for the defendant by the case of Bank of Black Rock v. B. Johnson & Son Tie Co., 148 Ark. 11, 229 S.W. 1, construing § 7789 of Crawford & Moses' Digest.

In that case the court said that, under this section, payment upon a forged check by a bank upon whom it is drawn is made at the bank's peril, and that the bank is not justified in charging it against the depositor's account, unless the latter is precluded from setting up the forgery or want of authority. But it is insisted by counsel for the defendant that there is no issue of forgery in the case. They claim that the instruction [160 Ark. 536] amounts to telling the jury to find for the plaintiff if Johnson did use his money by the plaintiff's permission, if Johnson, in getting it, did so by signing...